Savills Property Price Index (SPPI) in HCMC and HN Q1 2017

18 May 2017

Savills Vietnam would like to announce Savills Property Price Index (SPPI) in May, 2017 for Ho Chi Minh City and Hanoi with highlighted information as below:

At HCMC

Residential Index

The Savills residential index increased significantly over 2016 due to an abundance of mid-and high-end supply. However, it started to slow in Q1/2017 to 92 points, unchanged quarter-on-quarter (QoQ), and up 1 point year-on-year (YoY).

After a five-year high in Q4/2016, total sales decreased -13% QoQ in Q1/2017. The average absorption rate decreased -1 ppt QoQ due to low Grade A and B performance. Transaction volumes decreased -35% QoQ for Grade B and -50% for Grade A. Grade C continued to perform well, accounting for 62% of total sales and a 10% QoQ increase.

Western districts 6, 8, Tan Phu and Binh Tan are upcoming development areas focused on the Grade C segment. A large available land bank and infrastructure improvements are the key drivers for these areas.

Office Index

In Q1/2017, the Office Index was at 87, up 1 point QoQ and 3 points YoY. The QoQ improvement was from a 1% QoQ rent increase. Occupancy was up 2 ppts YoY and average rents up 2% YoY.

CBD occupancy was 97%, stable QoQ but up 1 ppt YoY. Average rent was up 1% QoQ and 2% YoY, due to limited stock and high demand. The CBD index rose 1 point QoQ and 3 points YoY.

In the non-CBD index an increase in occupancy was the main reason for the 1 ppt QoQ and 3 ppts YoY gains.

In Q1/2017, total office take-up was 4,400 m2, down -65% QoQ and -83% YoY due to limited vacancy. According to Savills’ office forecasting model, the prime office market is still in the lessor’s favour with rent forecast to increase 7% in 2017. However, performance will be negatively affected by the entrance of two large-scale projects in mid 2017.

AT HANOI

Residential Index

In Q1/2017, the Residential Index was 106.6, decreasing less than 1 point (pt) quarter-on-quarter (QoQ) and year-on-year (YoY). The average selling price of VND27.4 million/m2 was due to decreased secondary prices in some projects under pressure of increasing supply.

The overall primary absorption rate of approximately 27%, was down -4 percentage points (ppts) QoQ and -8 ppts YoY due to large supply. There were approximately 6,460 primary sales this quarter, decreasing -2% QoQ but increasing 15% YoY.

Near term stable performance is expected with more multi-function products. Focus will be on the affordable housing segment, mainly in large-scale projects in districts Ha Dong, Hoang Mai, Tu Liem and Thanh Xuan.

Office Index

In Q1/2017, the Office Index was 63.0 pts, increasing 1.5 pts QoQ and 5.2 pts YoY. Improvements of 0.7 ppt QoQ and 5.0 ppts YoY were mainly due to average occupancy increases.

The CBD index was up 0.2 pt QoQ but down -0.4 pt YoY as average occupancy decreased -1.0 ppts against 2016. The non-CBD index trended upward 1.9 pts QoQ and 7.4 pts YoY due to 2.4% QoQ and 3.6% YoY rent increases.

In the next two years, a lack of new CBD supply will likely see average rents increase. In contrast, the surge of new supply in non-CBD areas provide occupants with more choice, forcing rents to more competitive levels.